Using the Family Opportunity Mortgage Program in 2024
Family Opportunity Mortgage Loan Program
The lowest mortgage interest rates and the most favorable terms are typically reserved for owner-occupied homes. As the phrase implies, the owner of the home or property lives in the place as their main residence.
When analyzing risks for lending money, mortgage lenders feel that the owner of the place is more likely to work hard and make the payments compared to a tenant or even in the case of a vacation home.
However, this is an obstacle for people or families that can’t qualify for a mortgage and are looking to purchase a home for elderly parents with insufficient income or parents of a physically challenged adult child. For such situations, the NRL has a mortgage program known as the Family Opportunity Mortgage which will allow such a home purchase as an owner-occupied property even though you do not plan on living there.
This NRL Family Opportunity loan guide will walk you through the guidelines of the program to purchase a second home and get a mortgage on behalf of your parents or child.
Aging Population Creates Bigger Need
According to the 2020 census, 16.8% of the people living in the USA are 65 or older.
That means that we have over 55 million people in the country who are beyond the age of retirement. Many of these people will need some type of living assistance as their age increases.
For this reason, many households are looking at various options. Some people use nursing homes and other medical facilities to care for their families, but this can be a very expensive option and is not always the best option.
Others rearrange their home and their schedules to allow the aging relative to move in with them. But this removes some of the independence for the elderly relative and can be stressful for the family.
For these reasons and many more, NRL has expanded the definition of a primary residence to include a family member purchasing a home for their elderly parents and disabled adult child who does not have the income to qualify for the loan on their own.
NRL Family Opportunity Mortgage Guidelines
Many Americans are faced with trying to keep their family in a safe living environment. Some turn to renting a property that is nearby and cheap, but most people would prefer their family to own rather than rent. The problem, as mentioned above, comes in the structure of the loan.
When people take out a mortgage loan to buy a 2nd home, the down payment requirement is quite large.
Most lenders will ask for at least a 10% down payment, and possibly 20%. Furthermore, the interest rate for a 2nd home will be noticeably higher, especially on a long fixed-term mortgage option.
Also, the premiums for homeowner’s insurance are higher if the property is a 2nd home or a rental property.
The NRL Family Opportunity Mortgage allows borrowers to purchase a home for your family member for as little as 5 percent for the down payment along with owner-occupied interest rates.
Lower Down Payments, Loan Terms, and Mortgage Rates Save Buyers Money
The first significant savings for home buyers comes as a down payment.
While a loan option for an investment property normally requires between a 10% and 20% down payment, these guidelines only ask for a 5% down payment.
On a home priced at $225,000, the difference between a 20% down payment and a 5% down payment is $33,750. For most folks, the program is the difference between renting a place for a loved one vs buying a place for a loved one.
When you combine the low down payment of the loan with the lower interest rates offered by NRL, it is clear that this type of mortgage can save the buyer a lot of money over the life of the mortgage.
Debt-to-Income Ratios can be Higher
Besides the low down payment feature, the debt-to-income ratios available with this program are another big selling point of the mortgage.
The lending rules for most other loans such as FHA, the VA, or most conventional loans prefer that the borrower’s debt-to-income ratio be somewhere around 40% to 43%.
What does that mean, in real terms?
It means that the borrower’s home mortgage payment, plus all other existing debt like car payments, credit card bills, student loans, and other unsecured loans cannot represent more than 43% of the monthly gross income.
So, for a borrower that makes a $60,000 annual salary, their average monthly income, before taxes are taken out, is $5,000.
Using a calculator, 43% of $5,000 is $2,150. For this borrower, on a conventional mortgage or most other types of home loans, the most that they could spend in monthly debt would be $2,150
However, these guidelines allow borrowers to have as much as 50% of their gross monthly income dedicated to debt.
For the same $60,000 borrower, this means that they could have as much as $2,500 in monthly debt payments.
NRL understands that many households will be making a sacrifice to help with the purchase of a home for an elderly parent or a home for an adult child with special needs. All of this is taken into consideration with the higher ratios allowed on the mortgage.
Qualifying for a Family Opportunity Mortgage Home Loan Program
Qualifying for a mortgage with these guidelines is the same as obtaining a conventional mortgage.
This means that the borrower will need a better-than-average credit score compared to some other mortgage options.
It also means the borrower will need to have a very reliable and sufficient income to qualify for at least the last 2 years. However, the main borrower does not have to live at the home as their main residence.
The borrower will need to provide documents for their income as well as assets just like with any other traditional mortgage. Pay stubs, annual W-2 statements, tax returns, and investment & retirement account statements will all need to be provided to the lender.
NRL does have some restrictions about the type of homes that can be purchased.
- The property may not be a timeshare, second home, or investment property
- Single-unit dwellings are the only homes allowed
- The intended borrower must be the main person in control of the home
- The home needs to be suitable for living year-round
- The home cannot be used for a child enrolled in college
- The owner of the property may not agree to allow a management firm to take over the control or occupancy of the home
Qualifications for Aging Parents
These are the basic requirements for adults wishing to use this program to purchase a home for their aging parents.
- The elderly parents must either be in a situation where their income is not sufficient to qualify for a mortgage or they are unable to work.
- The elderly parents must live in the home as their primary residence.
- There is no requirement for where the home is located or the distance between the home of the elderly parent and the home of the adult child.
- The elderly parents are not allowed to be co-borrowers with this program. The adult child will be the borrower.
- The adult child may own a primary residence in addition to applying for the home of their elderly parent.
Could be Cheaper Than Assisted Living
Some households are faced with the possibility of paying for assisted living out of pocket. This can be truly expensive and even inconvenient for many people. With these guidelines, it might be possible to purchase a house for your parents and still afford part-time health care for them for less than the price of a nursing home.
Each situation is different, and your family will need to weigh the pros and cons of owning a second home versus using an assisted living facility to determine what is best for them.
Qualifications for Disabled Children
These guidelines are also ideal for parents that wish to provide a home for their disabled, adult child. Many people who face life with disabilities hold jobs and contribute to society in meaningful ways. However, their level of income is typically low and does not afford them the chance to buy a house.
Just like the situation mentioned above for elderly parents, the same rules apply to people who are looking to buy a home for their grown, disabled child. The parents will be considered the primary borrower and owners of the property even though their child will be the main resident. This allows the disabled child to exert a form of independence and gives the family and parents peace of mind knowing that their child is living in a safe place nearby.
Also, these guidelines are intended only for the children of the borrowers. They cannot be used on any type of investment or vacation home.
Summing Up How To Buy A Home For Your Elderly Parents or Disabled Adult Child
The family opportunity mortgage can help you buy a home for your elderly parents or adult children who are disabled without doing it as an investment property, which has higher interest rates. These guidelines offer an opportunity for both elderly people and those individuals fighting against a handicap to have a sense of independence while still being close to their loved ones for support.